11 Sep 18

VAT increase pushes up Russia car sales

Just over 147,000 new cars were sold in Russia this August, up 11% over the same month last year. Year to date, sales were up 16% to 1.14 million.

Market leader Lada increased sales by 9% compared to August 2017, while Kia, in second place, saw its sales go up by 25%. Completing the Top 5 are Hyundai (+4%), Renault (+3%) and Toyota (+23%). Other strong winners were Mitsubishi (+93%), Skoda (+34%), BMW (+27%), Nissan (+21%) and VW (+20%). Mercedes-Benz and Audi both grew just 1%.

Dampening effect
The rise in demand is largely in anticipation of a VAT increase, from 18% to 20%, that will come into effect from January. 

According to the Association of European Businesses (AEB), a Russia-based lobby group, retail sales (including car sales) in Russia are likely to remain high in the coming months, as consumers bring forward purchases in order to avoid the higher VAT rate from January. 

Automotive experts expect the tax increase will have a dampening effect on new-car sales in 2019.
Ruble devaluation
“Another reason for sales to increase now, is the devaluation of the ruble”, says Frédéric Hamain, General Manager of ALD Automotive Russia. “People are placing their money in an asset”. However, “(the tax changes have) no impact for us, since VAT is fully deductible, and our corporate clients can deduct it”.

“If we’re we talking about the VAT increase, I don’t foresee any changes in client behaviour, and thus do not see any risk for fleet sales”, adds Sergey Zykov, Managing Director of FWM – offering the caveat that “new legislation could influence sales significantly”.

Authored by: Frank Jacobs